Armata Pharmaceuticals, Inc. (ARMP) 2004 Q3 法說會逐字稿

Good morning, ladies and gentlemen. And welcome to the Targeted Genetics 2004 third quarter financial results conference call. Today's presenters are Stewart Parker, President and CEO of Targeted Genetics and Todd Simpson, CFO of Targeted Genetics. [Caller instructions.] At this time, I would like to introduce our first speaker, Stewart Parker.

Thanks, Karen. Good morning and thanks for joining us. Targeted Genetics has focused on data generation in our clinical programs during 2004. And the third quarter of this year was certainly no different. We've made considerable progress in our clinical programs and we continue to generate data that will help us further understand the potential of our product candidates to both treat or prevent disease. We remain on schedule to meet our milestones and expect to be presenting data from each of these clinical programs throughout the first half of 2005. Now, obviously, 2005 will be a big year for us. So this morning, I will focus on progress we've made to date and how it will impact the coming year as we continue to keep our focus on product commercialization. You will also hear from Todd Simpson our Chief Financial Officer who will review our financial results from the second quarter of 2004.

Before I go any further, however, I would like to remind you that during the course of this call, we may make projections and other forward-looking statements regarding future events or future financial performance of the Company. We do wish to caution you that such statements are only predictions and actual events or results may differ materially from the statements we make. So please see our documents that we file from time to time with the SEC for information about risks that may affect the Company including our most recently filed quarterly report on form 10-Q. So first, I will talk about progress made in our ongoing clinical trials. I will begin with an update on our cystic fibrosis or CF program. As many of you know we recently presented safety results from our ongoing CF Phase II trial. The Presentation at the North American Cystic Fibrosis Conference included an overview of clinical trial design, safety data on subjects treated thus far and conclusions of our interim analysis held back in June of this year.

Results from an independent data monitoring committee or DMC indicate that planned safety reviews have yielded no safety concerns thus far. In addition, a planned interim analysis for futility held in June, 2004, by the DMC resulted in the recommendation to continue the study. Now obviously data remain blinded to the Company, study investigators and participants until completion of the study. But we were pleased that ongoing independent analyses of our Phase II cystic fibrosis clinical trial continued to look favorable for our product candidate tgAAVCF. These data were presented by Dr. Richard Moss our lead clinical investigators in this study. So, we continue to remain on track to complete patient accrual and dosing in the study by the end of the year and believe we will be able to present data in the first half of 2005. Now just as a refresher, this study is a double blind, randomized, placebo controlled Phase II clinical trial designed to measure changes in lung function over time. Researchers also are assessing the impact of tgAAVCF on inflammation and biologic markers over time when compared with placebo. The study continues to monitor safety and includes a total 100 patients 12 years of age and older.

Study participants receive 2 doses of tgAAVCF or placebo delivered via nebulizer at day 0 and day 30 of the study. And are evaluated for change in lung function every 2 weeks over the course of 90 days. We're particularly interested in lung function improvement as measured by FEV1 at day 30 and also day 90 after patients have been off drug for 60 days. All external costs related to this study are funded by Cystic Fibrosis Foundation Therapeutics Inc., the drug discovery and development affiliate of the Cystic Fibrosis Foundation. And the study is being conducted through their therapeutics development network.

Now, let me move on to our AIDS vaccine program. In September, we and our collaborative partners at the International Aids Vaccine Initiative, or IAVI and the Columbus Children's Research Institute or CCRI announced that we had completed our core of volunteers in our Phase I vaccine clinical trials. And we were really pleased to have completed enrollment several months earlier than our projected end of 2004 time line. Our plan is to continue monitoring these volunteers in accordance with our clinical trial protocol. And after the required follow-up, we will complete analysis of the safety and immunogenicity data and present results in the first half of 2005 as planned. So we're on track to report our AIDS vaccine Phase I data in the originally planned timeframe. However, we had an opportunity to glean additional data from the study based on some interesting preclinical data we've generated in nonhuman primates. Now you may remember our first pre-clinical studies have shown that HIV DNA packaged in AAV capsid is highly immunogenetic after intramuscular injections. Immune responses to HIV antigens in mice and macacks used in preclinical studies persists for over one year after a single intramuscular injection. Such robust and durable immune responses after a single intramuscular injection have not been observed with other nongenetic vaccines.

Now that's exciting. But however a recent extension of the nonhuman primate study demonstrated that antibody and T cell responses can be increased even more after a second dose. So a vaccine that requires only a single delivery to achieve protective immunity would be particularly valuable under field conditions for vaccinating entire populations. But we feel it is important to determine whether the immune response of humans can, as in macacks, be boosted even more by a second dose. Therefore, we've decided to extend the current Phase I trial to study the safe and immunogenicity after a second dose. The volunteers who have participated in the Phase I trials will be offered a second dose. The data from the initial phase of the current clinical trial remain blinded. And the decision to move forward with vaccinating the volunteers with another dose of the product candidate was made based again on the data from a nonhuman primate study I just mentioned. After the volunteers have received a second dose and then followed according to protocol, we will unblind the study and still plan to report the data in the first half of 2005.

The study will remain blinded for the duration of follow-up after the second dose. And again, we do not expect the protocol extension to impact our ability to discuss the aggregate data from the first dose on the timeline we had originally projected. As part of the clinical development of the tgAAC09 vaccine; we are also currently assessing the testing of this vaccine in other non-industrialized countries for which this vaccine was designed. And our plans firm up, we will be updating you on where those trials will take place. And as we've mentioned previously, Targeted Genetics IAVI and CCRI continue to pursue the development of a multicomponent AIDS vaccine. This vaccine will include genes for both regulatory and structural proteins from HIV. And will have the most potential we believe to inhibit HIV entry and replication and thus protect against AIDS progression.

Now, moving on to our rheumatoid arthritis or RA program. As you will remember, in March 2004, we began a Phase I clinical trial testing local delivery of our product candidate, tgAAC94 in patients with RA. We continue to actively accrue patients into this Phase I study. And we believe we should complete patient enrollment in time to discuss results in the first half of 2005. Now, before I turn things over to Todd, I would also like to briefly mention that we did wrap up our sale of CellExSys is during the third quarter of this year. We had announced a merger agreement to give CellExSys a new home as part of Chromos Molecular Systems in June. And by July we were able to announce the closing of the deal. Now as many of you are aware, we had been seeking out strategic opportunities for CellExSys. To help realize the benefit of their technology and support advancement of the company's product development effort. While CellExSys technology was outside of the scope of Targeted Genetics core focus, we did feel that CellExSys had a substantial intellectual property position related into a very unique approach to cell therapy. And we believe that this approach has the potential to yield marketable products for infectious diseases and cancer.

So under this agreement, Chromos has acquired all if the outstanding shares of CellExSys through the merger between the 2 companies. We felt that Chromos was a great place for CellExSys because of their intent to grow Chromos into a leading cell therapy company. Along with their commitment to transition CellExSys technology into product development initiatives. We've always believed in the product potential of CellExSys technology. And this arrangement allows Targeted Genetics to realize the monetary benefit of any product success. So now, I will turn the call over to Todd Simpson, our Chief Financial Officer, who will review our financial results for the third quarter of 2004.

Thanks, Stewart. And thanks again to everyone for joining in this morning. Earlier today, we announced our financial results which included a net loss of $2.7 million, or 3 cents per share, for the third quarter of 2004. And $12 million or 15 cents per share for the 9 months ended September 30 of this year. This compared to a net loss of $780,000 or a penny per share for the third quarter. And $8.5 million or 16 cents per share for the 9 months ended September 30 of last year. While our 2004 operations are in line with our plan, the increase in net losses in 2004 primarily reflects the revenues that we earned in 2003, under our former collaborations with Wyeth and Biogen and specifically termination related revenues that we recorded last year. So with that in mind, our revenue in the third quarter of 2004 was 2.4 million compared to 5 million for the third quarter of 2003. And was $6.5 million for the 9 months ended September 30, 2004, compared to 12.7 million in 2003. So again, 2003 revenues included revenues from our former collaboration with Biogen, which totaled $3.4 million in the third quarter of '03, and $9 million from Biogen and Wyeth combined, for the 9 months ended September 30 of last year.

The primary sources of revenue in 2004 continue to come through our AIDS vaccine collaboration with IAVI. And to a lesser degree our contract manufacturing relationship with GenVec which was completed earlier in the year. As expected, AIDS vaccine collaboration revenues increased in the third quarter of this year. And are generally expected to increase in the second half of the year as program activities increase. The work plan and budget for 2004 under the collaboration involved activities that would bring up to $10.7 million in funding to the Company this year. Now, some of the planned activities have now been delayed until next year. And other activities have been removed from the work plan altogether as being unnecessary. As a result, we don't expect to incur all of the outside costs previously planned, or to receive the entire $10.7 million in funding this year. This will have a small impact on our overall cash requirements for the year. Which are now projected to increase by about 30% over 2003 levels, or to be in the $16 to $17 million range.

That said, some of the funding planned for this year should now come next year. And with a little over $31 million in cash, we continue to feel that we're in very solid shape from a cash standpoint, to get to our clinical data in the middle of next year and beyond. We continue to plan next year's collaboration activities with IAVI. And this should put us in a position to discuss the level of funding expected to support the program in 2005 later in the year this year. Our operating expenses for the third quarter of 2004 were $6.1 million, compared to $5.5 million in the third quarter of '03. And were $19.4 million for the 9 months ended September 30, compared to $20.3 million a year ago. Now, as I mentioned, 2004 expenses are in line with our plan. And the increases over 2003 levels reflect increased R&D expenses primarily related to the AIDS vaccine and rheumatoid arthritis programs. As well as higher G&A expenses reflecting increased patent issuances and regulatory compliance costs. Expenses for the 9 months ended September 30 of last year included charges of $3.6 million primarily related to our Bothell facility that we've talked about in previous calls.

And as Stewart mentioned we completed the sale of CellExSys is in July. So this year's quarterly and 9 month month results reflect a gain on that sale of $1 million. As of September 30 of this year our combined cash and cash equivalents had increased to $31.3 million. Enough cash to get us through our clinical data planned in the first half of next year and beyond. This compares to $21.1 million at the end of last year. And reflects the $24 million in net proceeds raised from our common stock offering in February. The other principal sources of funding during the year have been payments received under the AIDS vaccine collaboration with IAVI and then again contract manufacturing revenues that I mentioned earlier. So kind of short and sweet from - - with respect to my report this quarter. So I'm going to turn it back over to Stewart.

Thanks, Todd. So to briefly summarize the status and future plans for the 3 core product development programs for the Company: We're on track to complete patient enrollment and dosing in our ongoing phase 2 CF clinical trial by the end of 2004. And after that point, we will need to collect 90-day follow-up data points for the final patient. And then we can begin to analyze the results. We expect that in the first half of 2005, we will present these data in an appropriate peer reviewed setting. We also will continue our AIDS vaccine Phase I clinical trial with the goal of measuring safety and immunogenicity after our product candidate after a second or boost dose. So our same volunteers will be offered a second dose as I said. And the data from the initial phase of the current clinical trial will remain blinded. We still expect to present this data in an appropriate peer reviewed setting in the first half of 2005.

With regard to our RA Phase I clinical trial we continue to actively accrue patients into this study. And expect to complete patient in the first half of 2005. And expect to report data at some point in the first half of that same year. And finally, in addition to progress expected with our 3 core clinical programs, we also continue to explore business development opportunities related to the expanded potential of our technology assets. We believe that our AAV product development infrastructure can be leveraged into additional opportunities to generate revenue and additional product opportunities for the Company. AAV can be used to deliver gene, RNAI, antibodies, anti-stents, obviously a wide range of possibilities. So we're working hard on a number of opportunities that if achieved will go far towards validating Targeted Genetics as the AAV partner of choice. We hope to be able to talk more specifically about these opportunities in the coming months. So with that I would like to close this morning by thanking you all for your time.

I know that this week has included its own set of distractions so we certainly appreciate you all taking the time to join us. And in conclusion I would also like to express my sincere excitement for the direction of our business as we prepare to enter 2005. In the coming year, we will gather data results in all of our product development programs. And these data will provide us with a broader understanding of our product candidates and their potential to treat or prevent needs of people who are truly suffering with an unmet medical need. In addition these medical data will further our understanding of the potential of AAV in various disease settings. We continue to solidify our leadership position in this field as we develop more clinical data. And we certainly look forward to meeting these milestones and moving into the next stages of product development. So with that, I would be happy to answer any questions you may have.

[Caller instructions.] And our first question comes from the line of David Miller with Biotech Monthly. And David, please go ahead.

Thank you. Good morning. Recently, the FDA said that for approval in the U.S. they would likely need to have not only clave specific data for the U.S. claves but also U.S. specific data. Is this a surprise to you at all?

My understanding is that that whole landscape is changing fairly - - I would say that - - very definitely not static. So, you know, IAVI has been working very hard on this. The key person we work with is the former head of Merck's AIDS vaccine research. So I think that is he pretty much on top of that and certainly that question has been built into our development plans. But I should point out that the AIDS vaccine that we're working on with IAVI is for developing world, not for developed world. So I think that is not so much of an issue for us now. But really for long-term planning as we make plans for how we want to tackle the developed world.

Okay. When do you expect to have data from the second dosing of your current - - of your existing volunteers.

Well, we're still going to shoot for first half of '05. But, you know, can't really say exactly when that is going to happen.

For the data on the second dose?

Correct.

Okay.

That's correct.

And finally, you mentioned that you're working on a reformulation of that vaccine for lack of a better word, I guess. Can you describe the science behind that in a bit more detail about what you're trying to do with that? And whether it will be, you know, a one size fits all worldwide vaccine?

The first construct that we are testing clinically, is a very simple vaccine construct. It is the AAV vector containing [gag] proGene. And as we've mentioned, it is very important to look at various claves and various HIV genes from the genome. And so the goal is to develop a multi-component vaccine as opposed to this very simple construct we have. Which will contain multiple claves, multiple antigens and therefore potentially provide wider protection. So the plan has always been let's start with a simple construct and let's get general safety data. See what immunological data we generate. And in some ways pursue kind of parallel tracks at that site as we move ahead with the multi-component vaccine as well.

Any idea when we might see that out of your research labs?

We are still working on the work plan on that with IAVI. So I think as time progresses - - as Todd said later in the year we will have a better handle on both the work plan specifics and also on the budget.

Yes. Those activities have really been the lion's share of the work this year. And certainly next year.

Okay. Final question, I have, is has there been any movement on your discussions with the rheumatoid arthritis drug and Amgen?

We're continuing to have very productive discussions and beyond that, that's really kind of where we are.

Great. Thank you very much.

Our next question comes from the line of Russell Gilbertson. And Russell, please go ahead.

Good morning, Stewart and Todd. A couple of questions here. First, in terms of your tgAAVCF program, after you complete your phase 2B study, what are your plans for the development of this product?

Well, it is really is subject to the data, Russ. If, you know, if the data is remarkable, especially if the 90 day FEV-1 data shows the same impact on FEV-1 then we feel we have a really good shot at focusing on that program and accelerating it. But if the data, is not then we will have to look at alternative plans. So it is hard to answer that question until we see the data. We have a number of kind of contingent plans depending on the outcome of the study and we will pursue the path that makes the most sense. So, in a perfect world, and our hope is that this data will be very positive and we will be able to have an end of Phase II meeting with the FDA and talk more specifically about plans.

Assuming that the data is positive, would you go on with another Phase II study? Or would you move up into a Phase III study at that point in time?

Well, I think on there are a number of issues we have to look at. The FDA - - and it really is subject to what FDA requirements are. FDA may require us to do more of a dose scheduling study than we've done to date. And if that happen, then we will have to pursue that. But beyond that, again, it is sort of a function of how this data turns out. If we have phenomenal results at day 30 and day 90, then we may be able to put this on an accelerated track.

Sure. Sure. Understood. Now, are you doing any work with synthetic vectors at this time? Or modifying the AAV vectors so that it is more maybe effective?

We haven't felt a need to modify AAV vectors to make them more effective. We are working with various serotypes of AAV. Without getting too technical, most of the work to date with AAV in the clinic and even preclinically has been done with the serotype called AAV 2 which is sort of the work horse of AAV. And we all in the field have found that various serotypes of AAV have different transpection expression capabilities in different target cells. So for example, we have intellectual property rights to AAV 1, which is very efficient in getting genes to express in muscle. And so as we learn more about the field, which happens typically with new technology fields, we find that there is an opportunity to differentiate the use of different stereotypes depending on what the target organ or target tissue is.

The AAV 1 virus, would that be used for specific disease entities? Or could that be used in multiple situations?

It could be used in multiple situations. It just depends on what target cell you want to go to.

Can you give me an example of an indication?

Vaccines and cardiovascular indications. You know, anything that you want to get expression in the muscle for. Secretion of therapeutic proteins.

Okay. Good. And just a final question. If I could ask one more. In terms of your relationship with IAVI and Columbus Children's Research Institute, you did mention that you might not be receiving all of the 10.7 million that was potentially to be received in '04, and some of that has been moved over into '05. Could you just give me an idea about what you could expect to receive in terms of revenues from them? Or if that's not a concrete number yet, just an idea about where those discussions are?

Well, it is certainly not a concrete number for next year because the discussions are, you know, under way. Let me just pull a couple of numbers. Through the first 3 quarters of the year, our IAVI revenues were kind of in the $5 to $6 million range. And I mentioned that we were kind of ramping activities up in the back half of the year. You know, what will next year look like? Will it be bigger this year? Bigger than this year? Smaller than this year? It's a little hard to say. We're still, you know, kind of working out the details of what actual activities we will do next year right now.

Okay. Thanks a lot, Todd. And you guys have a great day.

Ladies and gentlemen, it looks like we have no more questions at this time.

Well, thank you all very much. We really appreciate your attention and we look forward to continuing to inform you on our progress in the future times. Thanks.

Ladies and gentlemen, thank you for participating in today's 2004 third quarter financial results conference call with Targeted Genetics. This presentation will be archived and can be accessed at www.targetedgenetics.com. Thanks again for joining today's presentation.